The mark price of Astral is used to anchor the crypto market price and encourage contract prices to converge towards the crypto price. It serves the following purposes:
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Trigger price for liquidation: The mark price is used to calculate the unrealized profit or loss of a position, and when the unrealized profit or loss of a position reaches a certain threshold, it may trigger a forced liquidation. Therefore, the mark price is crucial in determining the trigger price for position liquidation.
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Used to assess the reasonableness of the opening price: Traders need to consider the mark price when opening a position to ensure that their opening price aligns with the market price. If the opening price deviates significantly from the mark price, there may be risks or potential profit opportunities.
The calculation method for Astral's mark price is as follows:
Mark Price = Median(Price1, Price2, Contract Price)
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Price1 = Index Price * (1 + Funding Rate * (Time until next funding rate collection (in hours) / 8))
Here, the index price is the reference price for the Astral contract. The funding rate is a market mechanism used to balance the difference between the contract price and the underlying asset price. The time until the next funding rate collection represents the number of hours remaining until the next funding rate settlement.
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Price2 = Index Price + Moving Average (30-minute basis)
Here, the moving average is the average of price changes calculated at 30-minute intervals. It reflects the market price trend by computing the sample value for each minute.
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Moving Average (30-minute basis) = Moving Average((Bid1 + Ask1) / 2 - Index Price), sampled every minute at 30-minute intervals
This moving average is based on the prices from the buy and sell order books and compares them with the index price to measure the buying and selling pressure in the market.
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Funding Rate = ((Bid1 + Ask1) / 2 - Index Price) / Index Price - Funding Rate Settlement Interest, calculated every minute
The funding rate represents the rate paid or received between contract holders. It is based on the difference between the prices from the buy and sell order books and the index price, while also considering the funding rate settlement interest.
In conclusion, Astral's mark price incorporates multiple factors, including the index price, funding rate, and moving average, to provide a "true" valuation of the contract and help prevent unnecessary liquidations and market manipulation.